USD Rallies Again, CAD Slips as Risk Aversion Dominates Markets

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3950-1.4200

Euro                 1.6050-1.6300

Sterling            1.8270-1.8520

WTI Oil (opening level) $60.15

The CAD/USD is opening at 1.4082 ( 0.7102 )

USD rallies for the fourth consecutive day against CAD. The pair extends gains reaching fresh seven-month highs above 1.4080, buoyed by a risk-averse market mood, while CAD struggles with Crude prices.

The dismal market sentiment underpinning demand for safe-haven assets like the US Dollar, which remains among the best performing currencies on Tuesday, on investors rush for safety in the absence of key macroeconomic releases, with European equity indexes posting losses beyond 1% and US Futures in the red.

Beyond that, the hawkish message from Federal Reserve Chairman Jerome Powell, which puts further monetary easing this year into question, has prompted investors to dial back hopes of another rate cut in December, providing additional support to the USD.

Headlines

·    In October, the S&P Global Canada Manufacturing PMI increased to 49.6 from 47.7, marking a slight contraction—the slowest since January. Output and new orders declined less, affected by tariffs and trade issues. Employment fell slightly, with job losses easing. Input cost inflation rose, but firms increased selling prices more easily. Confidence improved but remained below trend due to trade policy uncertainties.

·    Australia’s RBA held its key interest rate steady – as expected – at 3.6% driven by a combination of lingering inflation pressures and a steady job market raising the bar for further easing. It expects core inflation to climb above the top of the 2-3% target through mid-2026.

·    The October ISM US Manufacturing PMI dropped to 48.7, below expectations, signaling eight months of contraction. Production, orders, inventories, and employment declined. Price pressures eased, but delivery slowed. Only two industries, Food, Beverage & Tobacco Products, and Transportation Equipment, expanded.

·    Gold and silver trade softer as the dollar reached a three-month high after FOMC members stopped short of endorsing another rate cut next month, extending the ongoing consolidation phase. The outlook now hinges on the broader risk appetite, with near-term support potentially being tested. Governor Lisa Cook noted that the risk of further labour-market weakness outweighs that of renewed inflation but refrained from explicitly supporting another rate cut, echoing recent comments from Mary Daly and Austan Goolsbee. Market attention now turns to Wednesday’s ADP employment report, with key support for gold seen in the USD 3,845–3,850 area.

Key Points

·    Equities: AI headlines lifted the S&P 500 and Nasdaq, Europe edged higher on autos, Asia firmed with Hong Kong up

·    Volatility: VIX softens, government shutdown delays data

·    Digital Assets: BTC/ETH drop amid $1.3 B liquidations, ETF outflows continue, altcoins slide, CIFR bucks trend on AWS deal

·    Fixed Income: Treasuries gain modestly amid stock market wobbles

·    Currencies: Euro drops to three-month low, yen strengthens amid verbal intervention

·    Commodities: Gold and silver retreat as cautious Fed and stronger dollar weigh on sentiment